Exploring the many reasons why car prices remain high
LEILA FADEL, HOST:
The auto market has been deeply weird for almost three years now. Some parts of it are getting more normal. Like, dealer lots aren't empty anymore. But when it comes to prices, NPR's Camila Domonoske has found that normal is still nowhere in sight.
CAMILA DOMONOSKE, BYLINE: Noah and India Grabisch checked out a fully loaded Chevy Suburban at a recent auto show.
NOAH GRABISCH: Suburban was 86,000.
INDIA GRABISCH: Yeah.
DOMONOSKE: They have a 4-year-old son and another baby on the way, so they want a bigger vehicle. But yes, he just said $86,000.
I GRABISCH: It looks nice, but we don't need all that space. But it's really nice. But for 86?
N GRABISCH: Yeah.
I GRABISCH: No.
DOMONOSKE: Yeah, no sums up how a lot of Americans feel about car prices these days. The average new vehicle is just under $49,000. That's actually down a bit from the previous month, but it's much, much higher than pre-pandemic. And used cars - wholesale prices were getting better last year, but now they're rising again. Ed Kim is the chief analyst of AutoPacific, and he says, brace yourself.
ED KIM: I think for at least a few more years to come, you know, we're going to see quite a bit of pain in the used car space as far as affordability.
DOMONOSKE: To understand why prices are still so high, first consider all the cars and trucks that weren't made over the last three years, every production line that shut down for a lack of computer chips or another supply chain snarl. And then when automakers did sell vehicles, they focused on their most profitable ones, which are big, expensive, top of the line. Think, you know, an $86,000 SUV. Smaller, cheaper, more ordinary vehicles...
KIM: These sorts of entry-level vehicles have been leaving the market at a very surprising rate as automakers focus on these higher-margin, higher-profit vehicles.
DOMONOSKE: American cars have been getting bigger since well before the pandemic, but the disappearance of the cheap end of the market accelerated sharply as supply chain woes kicked in. So today, if you're looking for a really nice car, you've got options. But in the budget category, not so much. There's a nonprofit, On The Road Lending, that provides loans to working families to buy vehicles, reasonably priced vehicles that are still under warranty. Think a modest 2-year-old sedan without too many miles on it. The kind of car they want to help people buy hasn't changed, but the prices have definitely changed. Michelle Corson is the founder and CEO.
MICHELLE CORSON: Our average loan amount 10 years ago was $13,000, and today it's $24,000. I mean, that's a really big jump in a 10-year period.
DOMONOSKE: And of course, everyone's big question is what's next? Some automakers say they want to make more affordable vehicles. They know there's a market that would buy them. But on the other hand, they are making a lot more money off the pricey ones. Here's analyst Ed Kim again.
KIM: We're not really expecting to see, you know, this resurgence of inexpensive gasoline-powered vehicles.
DOMONOSKE: And that's because all this cash carmakers are getting - it's going toward making cheaper electric vehicles. So Kim says more affordable rides are on the way, but they'll be powered by batteries, and they'll take a while to get here.
Camila Domonoske, NPR News.
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